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U.S. adds 209,000 jobs in July, sixth straight month of solid growth

Unemployment rate inches up to 6.2 per cent as more Americans start looking for work, businesses increase confidence.

Construction workers build a commercial complex in Springfield, Ill. this month. The U.S. economy added 209,000 jobs in July, the sixth straight month of 200,000+ job growth.
(Seth Perlman / THE CANADIAN PRESS)

By Christopher S. RugaberThe Associated Press

Fri., Aug. 1, 2014

WASHINGTON—U.S. employers extended this year’s hiring surge into July by adding a solid 209,000 jobs. It was the sixth straight month of job growth above 200,000, evidence that businesses are shedding the caution that had marked the 5-year-old economic recovery.

The unemployment rate ticked up to 6.2 per cent from 6.1 per cent as more Americans started looking for work. Not all found jobs, but the increase suggests that they are more optimistic about their prospects. The jobless aren’t counted as unemployed unless they are actively seeking employment.

Still, the employment growth may raise alarms for investors, some of whom fear the U.S. Federal Reserve might increase short-term interest rates sooner than expected.

Economists predicted that the U.S. government would say employers added 225,000 jobs in July, according to a survey by data provider FactSet. That would follow June’s big 288,000 increase. And it would mark the sixth straight month of gains above 200,000, the longest such stretch since 1997.

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This year’s burst of hiring had lowered the unemployment rate to 6.1 per cent from 6.7 per cent at the start of the year, which was the lowest it’s been in six years.

The economy strengthened significantly during the April-June quarter, the government said Wednesday, after contracting sharply in the first three months of the year. Last quarter’s bounce-back assuaged fears that the economy hadn’t been strong enough to support this year’s rapid hiring.

The economy expanded at a 4 per cent seasonally adjusted annual rate in the second quarter after a steep 2.1 per cent contraction in the first quarter. Americans stepped up their spending, particularly on autos, furniture and other big-ticket items. Businesses also spent more on plants, office buildings and equipment.

Signs suggested that employers have kept hiring at a healthy pace. ADP, a private payroll provider, said Wednesday that businesses added 218,000 jobs in July, with most industries showing solid gains. (ADP’s figures capture only private businesses and sometimes diverge from the government’s more comprehensive numbers.)

In addition, far fewer Americans are seeking unemployment benefits, a sign that companies are cutting few jobs. The number of first-time applications for benefits fell two weeks ago to its lowest level in 14 years. The four-week average of applications is at an eight-year low. When companies are confident enough to retain their staffs, it suggests that hiring will pick up.

Americans are also slowly gaining confidence in the economy, which means spending could accelerate in coming months. The Conference Board’s consumer confidence index jumped to its highest level in nearly seven years in July.

The Conference Board’s survey also asks Americans whether they consider jobs “plentiful” or “hard to get.” In July, the percentage who chose “plentiful” rose to 15.9 per cent, the most since May 2008. Consumers’ perceptions of the job market have been a generally reliable predictor of the unemployment rate.

Yet the pickup in hiring has yet to translate into larger paychecks for most Americans, thereby hobbling the recovery. Average hourly pay has risen just 2 per cent in the past year, barely keeping pace with inflation. In a healthy economy, wages before inflation would increase 3.5 per cent to 4 per cent annually.

Weak pay gains are restraining the housing market, usually a key driver of growth. A measure of signed contracts to buy homes slipped in June, the National Association of Realtors said this week. That suggests that home sales will decline in coming months.

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